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No EMI cheques if ECS is available

Banks have been directed by the Reserve Bank of India to not accept any fresh post-dated equated monthly instalment (EMI) cheques at locations where the facility of electronic clearing service/Regional Electronic Clearing Service is available.

The central bank has also advised banks to convert existing cheques in such locations into ECS/RECS (Debit) by obtaining fresh mandates.

Cheques complying with the CTS-2010 standard formats alone should be collected, at locations where the facility of ECS/RECS is not available.

The new ‘CTS 2010’ standard cheque has been introduced on account of several developments in cheque clearing — growing use of multi-city and payable-at-par cheques at any branch of a bank, popularity of speed-clearing for local processing of outstation cheques and implementation of grid-based cheque truncation system for image-based cheque processing.

ECS is an electronic mode of payment / receipt for transactions that are repetitive and periodic in nature. Essentially, ECS enables bulk transfer of money from one bank account to several other bank accounts, or vice-versa.

Under ECS (debit), an account-holder with a bank branch can authorise an ECS user to recover an amount at a prescribed frequency by raising a debit to his / her bank account.

Regional ECS currently operates at nine centres / locations across the country.

RECS facilitates the inclusion of all core-banking-enabled branches in a State, or group of States, and can be used by institutions to reach beneficiaries easliy.

CTS – 2010 Cheques

CTS – 2010 Cheques Information

What is Cheque Truncation System (CTS – 2010):  

Simply put, CTS is a process that will give banks the freedom to avoid transporting a physical cheque from the presenting bank (where the cheque is deposited) to the drawee bank (where it is issued). As per the CTS, instead of a physical cheque, an electronic image of the cheque will be sent to the drawee bank. Of course, this image will have all the necessary information needed to process the cheque. Right from the nine-digit MICR code, the date of the cheque and the details of the presenting bank, like branch, etc.

What’s the big deal about it

Faster: Since the cheque will not actually move from one location to another, the time needed to clear the cheque will be lesser. So, if an inter-city cheque takes anywhere from three to seven days (at time more) to get cleared, with CTS it will take a maximum of a couple of days; at times, even it might get cleared the same day.

Curtail Loss: When a cheque has to be moved physically, it can get damaged or worse even get lost in transit. CTS would take care of such issues.

What should you do:

Request: First get in touch with your bank, give them the Non-CTS cheques for cancellation and request the new kind of cheques. That is, CTS 2010 standard cheques.

Ink: Also, keep in mind that going forward, when you write the cheque you should use darker ink so that your signature is captured by the software properly.

Be careful: Also, when you fill the cheque you will need to be extra careful. If you make any alterations in the cheque, your cheque will simply not be cleared; this is to ensure that the risk of fraud is reduced. Which means you will have to use a new cheque leaf if you make a mistake. And the fact that many banks are charging for extra cheques means you might just have to bear the extra cheque costs too.

The RBI plans to have this new system implemented across all banks. So get yourself at least one pen with darker ink.

Cheques containing fractions of Re not be rejected

Cheques containing fractions of Re not be rejected: Reserve Bank of India

If your bank has been refusing to accept cheques for amounts that include fraction of a rupee, it’s against the rules and the bank should be penalized.

In an internal circular issued earlier, the Reserve Bank of India (RBI) had warned that banks which refuse to accept cheques on such grounds from customers will be sternly dealt with.

According to an RBI circular issued in March 2007 (RBI.No.2006-2007/299), banks were advised that cheques issued by clients containing fractions of a rupee should not be rejected or dishonoured.

The RBI circular was issued by chief general manager, P Vijaya Bhaskar. It referred to a High Court ruling of February 2007 in which Justice RS Garg had said: “The RBI is hereby directed to issue fresh notifications/notices to all the banks, who have issued internal circulars, not to receive such cheques, etc. and see that stern action is taken against the persons who refuse to receive the cheques/drafts which are in fragments.”

Justice Garg further said in his order: “No Bank can say that it would not receive one rupee note or five rupees notes. A bank is a banker on whom the customer banks upon. A bank cannot say that it would receive only big notes and rest is to be circulated in the market. If a customer goes to the bank and says that he wants to deposit a sum of Rs. 1 Lakh in five-rupee notes, the bank, the clerk, the cashier cannot say that they would not receive it.”

On ‘Interest Rates on Deposits’, banks were advised that all transactions, including payment of interest on deposits/charging of interest on advances, should be rounded off to the nearest rupee; i.e., fractions of 50 paise and above shall be rounded off to the next higher rupee and fraction of less than 50 paise shall be ignored.